EFIC insures financial institutions and banks providing a hedge facility (e.g. commodities) in connection with a project finance loan for an overseas resource or mining investment/project.  EFIC’s Political Risk Insurance – Hedge Bank Policy insures these financial institutions and banks against financial loss incurred as a result of the hedge counterparty’s non-payment or non-delivery of amounts due under the hedge facility where the sole and direct cause of non-payment/delivery arises from any of the insured political events.

Typically the Hedge Banks Policy is issued in conjunction with EFIC’s Political Risk Insurance – Lenders Policy where the project finance loan underlying the Lenders Policy requires hedging to be in place.

Insured

Financial institution/bank carrying on business in Australia or a subsidiary of such a financial institution/bank providing a hedge facility in connection with the debt financing for a resource or mining investment/project outside of Australia.

Sponsor

Any company undertaking the development of a resource or mining investment/project outside of Australia. The Sponsor need not necessarily be an Australian company.

Hedge Counterparty

The entity to which the Insured is providing the hedge facility. This may be a special purpose company, the Sponsor, or some other entity acceptable to EFIC. This entity will also be the borrower under the debt facility for which the hedging is required.

Insured Political Events

EFIC will provide insurance against the Hedge Counterparty defaulting on its obligations under a hedge facility (ie a scheduled obligation or a close-out payment) where the sole and direct cause of the default is one of the following political events:

• expropriation
• war damage
• political violence
• currency inconvertibility and exchange transfer blockage

Cover can also be provided for other political events such as deprivation, forced abandonment, selective discrimination and default by the host government of an arbitral award following a breach of a contract.

EFIC’s Maximum Liability

This is the maximum amount which EFIC will insure. Typically this will be based on the Insured’s determination and valuation of its projected peak exposure for the duration of the hedge facility. 

Level of Indemnity

An Insured’s loss may be indemnified to a level of up to 100%.

Term of Policy 

A policy’s term will typically be for a duration equal to the term of the hedge facility to be insured.

Currency of Policy

Policies will be issued in the same currency as the hedge facility. This must be a freely available and convertible currency.

Costs

EFIC’s premium will vary depending on factors including the country for which cover is sought, the region where the investment or project is located, the period of insurance, the political risks being insured and the type of investment or project requiring the hedge facility. 

DISCLAIMER  This document is provided to give you an indication of the terms and conditions upon which EFIC may be willing to provide insurance. In connection with a particular transaction, EFIC reserves the right to make any changes or additions to the final terms and conditions that it believes are necessary or desirable. All requests for insurance are considered on a case by case basis.